Alaskan Oil To South Korea -- Because Of The Bakken, How Do You Like Us Now? -- October 31, 2014

Bloomberg is reporting:

For signs of how the U.S. shale boom is transforming the global flow of oil, look halfway across the world at South Korea.

The Asian nation, which relies on the Middle East for about 86 percent of its oil imports, is benefiting as new output from Texas to North Dakota displaces the crudes that fed U.S. refineries for decades.

South Korea received this month a shipment of Alaskan oil for the first time in at least eight years and may buy more, the importing company said. The country was one of the first to receive a cargo of the ultralight U.S. oil known as condensate after export rules were eased.

The U.S. shale revolution has driven oil output to the highest in more than three decades, reducing America’s need for overseas purchases and sinking global prices into a bear market. South Korea is seeking to reduce its dependence on Middle East crude just as OPEC’s biggest members discount supplies to protect market share and Goldman Sachs Group Inc. predicts the group is losing influence.

The US is trying to take market share away from OPEC. Memo to OPEC: how do you like us now?

How Do You Like Me Now, Toby Keith
Whoever thought the US would be an exporter of crude?

Week 44: October 26, 2014 -- November, 1, 2014

Operations
Oil prices dropping, but fracking revolution rolls on
COP to cut back drilling in the Bakken due to slump in oil prices

Bakken Economy
Alexander, Watford City bypasses completed
New businesses in the Bakken -- Williston Wire
Update on the $4-billion petrochemical plant to be built near Bismarck

Natural-Gas Liquids
Shale boom shines light on natural-gas liquids

Miscellaneous
A Silurian well hits the one-million bbl milestone

Bakken 101
Bakken nomeclature -- CLR

Flashback: From The Archives -- The Coming Glut -- October 31, 2014

This was posted on June 5, 2013.

For the archives. From SeekingAlpha.

Stepping away from the pack, Andrew Coleman of Raymond James Equity Research is making a contrarian forecast for an oil glut in 2014. Shale oil production is on the ascent, with the United States joining Saudi Arabia on the supply side, while China's hunger for oil may be sliding and demand in developed countries remains in decline. In this interview with The Energy Report, Coleman explains his thinking and names the producers best positioned to capitalize on the turbulence ahead.

The Energy Report: Why are you expecting an oil glut in 2014?

Andrew Coleman: Because of the evolution of North American shale oil plays, we are on track to add about 3 million barrels [3 MMbbl] of new supply over the next five years. Yet we know oil demand has been falling across the developed nations and is still weak coming out of the global financial crisis. Those developments point toward a glut.

Investors had a full year to position their investments. I hope Mr Coleman was justly rewarded by his firm. Great, great call. 

Seventeen (17) New Permits -- North Dakota, October 31, 2014

Active rigs:

	10/31/2014	10/31/2013	10/31/2012	10/31/2011	10/31/2010
Active Rigs	193	180	186	199	152

Seventeen (17) new permits --

• Operators: BR (5), WPX (5), KOG (3), Enduro (2), XTO, Denbury
  Fields: Johnson Corner (McKenzie), Pershing (McKenzie), Truax (Williams), Newburg (Bottineau), Eagle Nest (McKenzie), Bear Creek (Dunn), Cedar Hills (Bowman)
  Comments:

I was wrong; yesterday I said there were no wells coming off confidential list today; it turns out there were two (but I see why they were not listed):

• 23846, loc, CLR, Bison 41-23H, Cedar Hills,
• 24650, PNC, KOG, P Wood 154-98-3-27-16-3H, 

Two (2) producing wells completed:

• 27747, 812, XTO, Willey 31X-3G, West Capa, t10/14; cum --
• 27748, 655, XTO, WIlley 31X-3F, West Capa, t10/14; cum --

Top Story At Yahoo!Finance Right Now: Oil Prices Dropping But Shale Revolution Rolling On -- October 31, 2014

Updates

Later, 6:12 p.m. CDT: a reader sent me this link with regard to the current slump in oil prices --

“We don’t really know where oil prices are heading, or how this will affect our chief competitors, OPEC and Texas, but we are in this together,” states Helms. “Not only is North Dakota under a lot of pressure, the OPEC counties are as well.”

Helms reports that today’s world oil price is $66.25 per barrel.

“Saudi Arabia needs $94 per barrel, and Iraq $116, to satisfy their current government budget,” states Helms. “So they are below break-even in terms of world oil prices.”

The only oil-producing country that is still faring well is Kuwait, which requires $59 per barrel.

The good news is that, as far as North Dakota and McKenzie County are concerned, McKenzie County’s break-even point is $28 per barrel, which is the lowest break-even point of all the oil-producing counties in North Dakota.

McKenzie County also has the highest number of drilling rigs at 66 out of 190. 

Original Post

The story:

$75 dollars a barrel – that’s the price crude oil would have to hit for frackers in North Dakota’s Bakken fields to feel pressure to slow new production, according to Greg Zuckerman, author of “The Frackers” and a special reporter at the Wall Street Journal.

“All these guys have hedged. They’ve got production [and] they’ve already got the acreage. They’re not gonna stop but maybe they’ll kind of slow new stuff.”

Fracking in other parts of the country, though, is likely to be much more resilient.

In Texas’s Eagle Ford and Permian basin, Zuckerman says oil prices would have to drop as low as $60 a barrel for production to be impacted.

Which is to say – don’t think the free fall in oil prices this year will jeopardize the fracking revolution.

“There’s a challenge, [frackers are] going to make less money; you’ll see a slowdown in production. But the revolution’s going to continue,” said Zucerman.

“I would argue that we’re only in sort of, maybe, the third inning even of a long, impressive revolution. And so this will slow things down but I don’t think it’s going to stop the revolution.”

My copy of The Frackers is across the room; reading slowly to enjoy it. A reader sent me a copy. Much appreciated.

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The Market

This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Do not change any travel plans based on what you read here. 

At new 52-week highs: AAPL, AEP, CAH, EW, SRE, TSO, UNP, UPS.

Why I Love To Blog: Reason 4,359 - The Links, October 31, 2014

Over the years I have collected a number of links that readers have sent me.  One can find all this data by googling, but there are advantages to maintaining a data link list.

The data link / metric that I think will be one of the most interesting to follow for the next 14 months is "gasoline demand."

When you get to that link, scroll immediately to the bottom of the page (I have no idea why this graph is not the first thing one sees when one gets to that page): the graph on gasoline demand. Two things should drive gasoline demand:

• dropping price of gasoline
• recovery of the economy

Of course gasoline demand driven upward by those two factors will be offset by better gas mileage, but I doubt average mileage in fourteen months will not be all that different than gasoline mileage today.

After you check out the gasoline demand graph, take a look at the rest of the page. For example, gasoline stocks and days of supply. Note that most of those graphs have multiple graphs "behind" the one you may be looking at. There are links to related graphs to the right of the graph you are looking at.

After you finish reviewing this page, then go back to the narrative, this week in petroleum. This is essentially what the talking heads at CNBC do. The producer downloads the report, highlights the key phrases with a yellow highlighter and then hands it to guys and gals like Bob Pisani or Sharon Epperson.

The other graph to follow, but of much less interest to me, is the graph on crude oil imports. Crude oil imports will never drop below 6 million bbls/day, much less go to zero, for several reasons. Because the Keystone XL has been killed, US gulf coast refiners cannot get the heavy oil they need; they will get heavy oil from OPEC countries, like Venezuela. A second reason is that the country's largest island, California, gets its oil from three sources: the Bakken (a very minor percent at this point); Alaska (not exactly a good news story); and OPEC. The third reason is Motiva: the Port Arthur refinery, owned jointly by Saudi Arabia and Shell, is the largest refinery in North America and the fifth largest in the world.

It is interesting to look at US crude oil exports but it's pretty meaningless.

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Global Warming

Climate Change

Extreme Weather

Ice Age Now

Headlines today suggest an earlier winter than some had expected with CO2 levels exceeding  400 ppm:

• freeze warning in all of northern Alabama
• Chicago snowfall record for Halloween; 300+ cancellations at O'Hare
• record cold temperatures along the East Coast

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Boots On The Ground

I think the big question for President Obama with regard to "boots on the ground": where will he deploy troops first: Anbar Province (west of Baghdad) or Ferguson (west of east St Louis)?

Busy, Busy, Busy Day But I Will Be On The Net For Only An Hour Or So This Morning -- October 31, 2014

Busy, busy, busy day. Not much yet in the Bakken but a lot in the market.

Reminder: this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Also, do not make any changes to your travel plans based on what you read here.

CVX and XOM numbers are out. I will get back to them later.

The Dow was up almost 200 points in pre-market trading, has dropped back to 140 on the upside, and has hit new highs. Who wudda thought?

Here in the Bakken:

Active rigs:

	10/31/2014	10/31/2013	10/31/2012	10/31/2011	10/31/2010
Active Rigs	191	180	186	199	152

I'm looking for 175 rigs before the end of 2015 if the movers and shakers on Wall Street think the  price of oil will remain low for the foreseeable future.

RBN Energy has a great story -- second in a series -- on Japan and LNG which dovetails with the story out of Japan today, the latter driving the market higher. From RBN Energy:

Japan is the world’s leading importer of liquefied natural gas, and its dependence on LNG has only increased since the March 2011 Fukushima nuclear disaster, which led to the shutdown of Japan’s 48 nuclear units. Some of those nukes are expected to return to service starting in 2015, but it’s possible—some would say likely—that a quarter or maybe even half of Japan’s nuclear fleet will never be restarted. While coal is cheap and oil is cheaper than it was a few months ago, natural gas-fired generation is seen as the best short-, mid- and long-term substitute for nuclear power. As a result, Japan utilities are working to increase and geographically diversify their LNG purchases, and to break what for decades has been a link between the pricing of LNG and oil. Today, we continue our look at how Japan’s response to the Fukushima disaster affects U.S. and Canadian natural gas producers and LNG exporters.

US and Canadian natural gas producers and prospective LNG exporters should read all that as good news. After all, the Japanese government and its big LNG importers (including its electric utilities) have indicated that they see US suppliers in particularly as their next go-to source for LNG. (So do India, China and South Korea.) Why? While Qatar and most other traditional LNG suppliers to big Asian buyers have remained adamant in linking their LNG prices to the price of oil, US exporters have been very willing to link their LNG prices to Henry Hub natural gas prices—typically 115% of Henry Hub plus a capacity charge of $3 or so per MMBTU (shipping and handling not included).

Canadians have been less willing to jettison the LNG/oil linkage, to their detriment. Oil prices, as we know too well, have been sagging as of late, so an LNG price indexed to oil isn’t as onerous now as it was just a few months ago.

Still, three primary aims of Japanese and other Asia LNG buyers are hedging, hedging and hedging—namely, to mitigate the price premium long associated with LNG prices linked to oil to minimize long-term price risk. No one wants to overpay, whether they are buying a new car or cable service or LNG.

Next time, we will take a deeper look at LNG pricing in Asia, what Japanese LNG buyers have already committed to purchase from North American suppliers, and how much of the incremental LNG Japan will need in the next 10 to 30 years is likely to come from US and Canadian sources.

Much, much more at the linked article. 

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On a more depressing note it looks like the Enbridge Sandpiper is the new Keystone XL. I think I will take the poll down and then bring it back up in a couple days to see if sentiment changes with the updates coming out of Minnesota. But that will have to wait. Not sure if I want to go through all that bother.

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So, what's the market doing?

CVX: quarterly profit jumps 13%. From Reuters:

The company posted net income of $5.59 billion, or $2.95 per share, compared with $4.95 billion, or $2.57 per share, in the year-ago period.

Production fell nearly 1 percent to 2.57 million barrels of oil equivalent per day as new wells failed to offset declines at old wells.

XOM: quarterly profit rises 3%. From Reuters:

Profit in the third quarter rose to $8.07 billion, or $1.89 per share, from $7.87 billion, or $1.79 per share in the year-ago period.

Analysts, on average, expected a profit of $1.71 per share.

Oil and gas production fell 4.7 percent. Exxon said it remained on track for full-year output of 4 million barrels oil equivalent per day (boed).

MMP: beats by a nickel; shares rise nicely. Press release. 

Genesee and Wyoming had a great quarter. The AP is reporting:

On a per-share basis, the Darien, Connecticut-based company said it had net income of $1.27. Earnings, adjusted for non-recurring gains, were $1.21 per share.

The results beat Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.17 per share.

The railroad operator posted revenue of $432.5 million in the period, also surpassing Street forecasts. Analysts expected $424.5 million, according to Zacks.